As an attorney for insurance companies, I’m amazed at how often policyholder attorneys come to mediations with little knowledge of the case and relevant issues, or even the client. I hear stories of insurance company representatives and counsel being disrespectful to their insureds and making low-ball offers with threats of summary judgments and motions for sanctions if lawsuits are not dismissed.
As counsel for the carrier, nothing disheartens me more than discovering the insured’s counsel has minimal knowledge about the case. I immediately know that the case has no chance of settlement. Likewise, in circumstances where the attorney takes an approach which immediately insults the insured, the acts of the public adjuster or their claim, the case will not settle.
Week in-and-out, I attend mediations where the attorney hasn’t researched the legal issues, spoken with the client, made well-principled demands or listened to the mediator’s words of wisdom. Some attorneys even request that the mediator not speak to the client.
As we turn the page on a new year, below are some tips to consider for more effective mediation.
Know Your File
First, and most important, know your file. If you are uncertain whether the claim was denied for a coverage reason or allegedly underpaid, the insurance company representative will become less inclined to reward you or pay your client for your laziness.
Too busy to remember the date or the cause of the loss? Don’t expect an insured to believe you’re prepared and ready to try the case.
Read the Policy
The insurance contract controls the relationship between the parties. Often, attorneys for policyholders want to negotiate dollars with complete disregard for coverages under the policy. Likewise, insurers may want to rely upon exclusions that don’t apply or coverage limitations that the courts have found legally insignificant. Read the policy, understand what coverage defenses the insurer is relying upon and be prepared to have an intellectually honest discussion about how all of these apply. Don’t expect an insurer to negotiate dollars simply for the sake of negotiation. Be prepared to discuss why limitations or exclusions don’t apply to the claim to support your demand for money. At the same time, insurance companies shouldn’t rely upon policy limitations and exclusions without ensuring their counsel is prepared to advise what the likely outcome will be when a judge is considering the applicability of those same limitations and exclusions.
The Client is the Decision Maker
Ultimately, it will be the policyholder and company representative who will decide whether to settle the case. They must be educated on the relevant facts, issues and law prior to mediation. The first caucus of mediation isn’t the time to explain the inflated and unrealistic nature of the public adjuster’s estimate to the insured.
When counsel for the policyholder makes an opening demand of $200,000 on a $15,000 claim, consider the message being sent, especially when two hours later he or she may have to explain to that client why $15,000 is a good settlement. As coverage counsel for the carrier, don’t recommend an opening offer of $2,500 on a $500,000 claim – you will lose credibility with your adjuster, whose goal is to resolve the case efficiently and for the best amount. For company representatives, time is money and no one wants to take 10 hours to resolve a mediation which could have been concluded in three.
To effectively and successfully mediate cases, your offers or demands must be reasonable and thought out. Most importantly, if you make an offer or demand, stand behind it. If you’ve properly prepared for mediation and formulated a strategy with your client, you’ll also have a negotiation strategy based on facts, relevant issues, policy concerns and the law. This way, you’ll build credibility with your client and opponent who will have to believe you when you say you’re prepared to go trial. You can also turn a skeptical mediator into an advocate during caucus. Mediators will know when the other side doesn’t know their case or isn’t going to take the case to trial. When that happens, chances are you’ll obtain a reasonable settlement. Convince the mediator you know your case, the issues, policy and the law, and the mediator will communicate that to your opponent. Therefore, the opponent will have little choice but to take your offers and demands seriously.
Listen to the Mediator
Don’t mediate a case with a mediator you don’t trust. No matter how many cases you have mediated, the mediator will have participated in many more. Mediators will not provide legal advice, however they will point out strengths and weaknesses in your case, evidentiary or legal issues you may face at trial, and provide their thoughts about the likelihood of a successful trial.
Likewise, mediators will provide you with insight regarding local jury pool perceptions, opinion of the presiding judge and other matters in evaluating your case based on the venue. Good mediators will even provide subtle insight into what is going on in the other room in a manner that does not betray their trust. Ask yourself, what do we have to lose by listening to someone who is likely more knowledgeable and speaking directly to your adversary? Sadly, many attorneys are unwilling to listen to what the mediator says and some will advise against conversation between their client and the mediator.
Your mediations will be successful if approached properly and executed professionally, no matter the outcome. You will build trust and credibility with your opponent and, most importantly, with your client, allowing for an informed decision about whether to settle or proceed to trial.
Ultimately, once a lawsuit is filed, mediation is the only time your client will make a decision as to the outcome of the lawsuit. Otherwise, it will be one judge or six strangers deciding who is right and wrong. It’s your job as the client’s advocate to treat the mediation as the important event in the life of a claim or lawsuit that it truly is.
Michael A. Packer is a shareholder in the Fort Lauderdale office of Marshall Dennehey Warner Coleman & Goggin, where he serves as supervising attorney for insurance coverage and bad faith matters in the state of Florida. He can be reached at (954) 847-4921 or firstname.lastname@example.org.
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